Primary Health Properties (PHP), which owns 21 primary care centres across the Republic, says it remains committed to expanding here as it reported interim results in line with expectations.
The rapid rise in building costs over the past couple of years has seen the UK-based and London-listed real estate investment trust (Reit), which specialises in building and leasing out health centres, pause further expansion in the market.
But chief executive Mark Davies is upbeat about the future, with the company noting that the population in both Britain and Ireland is “growing, ageing and suffering from increased chronic illnesses, which is placing a greater burden on healthcare systems” in both countries.
“There has been a disconnect with what the HSE is prepared to pay for new schemes – in terms of the rental levels – and where build cost inflation has got to,” said Mr Davies, who took over from group founder Harry Hyman as chief executive in April.
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That meant a couple of planned schemes in Ireland were no longer viable, he said, and everything was “put on standby”. However, he added, a retendering process “has just kicked off so we are obviously very active in that”.
In its results, the company says its “near-term pipeline” in Ireland has “an estimated gross development value of approximately €50 million”.
Axis Technical Services, the Irish property management group acquired by PHP last year, is charged with identifying opportunities in the market. The group’s current Irish properties are valued at £244.4 million (€288.5 million), accounting for around 9 per cent of the PHP £2.75 billion portfolio by value even though its assets here amount to just over 4 per cent of PHP’s 516 properties.
The company, which first invested in Ireland 10 years ago, has a stated aim of building the Irish business up to account for around 15 per cent of its group portfolio.
“Things are beginning to pick up again. It is a cracking portfolio in Ireland,” Mr Davies said, adding that the company was keen to “do more Ballincolligs if you like” referring to the enhanced care facility which it acquired for €29.6 million from O’Flynn Construction last year in its largest single investment in Ireland to date.
“We have over £300 million of firepower at our disposal and we are always looking for interesting opportunities to deploy that capital. We would like to increase our weighting into Ireland.”
PHP acquires the GP-focused health centres, or builds them themselves, and rents them out predominantly to the HSE under agreements that provide for five-year rent reviews in line with the consumer price index.
“We are impressed with what we see with the HSE and the Irish Government and their promotion of community health and we are well-placed with the expertise we have got to work alongside them to deliver that,” Mr Davies said.
However, the results make particular reference to opportunities for the business in the UK under the new Labour government.
“Clearly this changing government looks very good for our company,” Mr Davies said. “New health secretary Wes Streeting really gets community health and primary healthcare and is committed to spending billions more pounds in this area often at the expense of what is currently spent in hospital environments.
“He ‘gets it’ that a patient going into a hospital environment is costing the country over £400 per patient. An equivalent patient coming into primary health is costing as little as £40 per patient, so it is a cost/benefit dynamic that he is seeking to fix.
“All the noises that have come out of the new government look great for us and it is a refreshing and dynamic change that we very much welcome.”
Revenue jumped over 9 per cent in the company’s first half to £91.9 million with net rental income increasing by just under 1 per cent to £76.2 million. Profits, adjusted for exceptional costs, were higher by a similar amount at £46.3 million.
The company raised its dividends by 3 per cent to 3.45p per share in the first half, noting its “track record of 28 years of consecutive dividend growth”.
“It was a good set of results which was important for us,” Mr Davies said, adding they were “in line with consensus and everyone’s expectations, so no surprises”.
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